PPK Group Limited has announced it has completed the deal to acquire the COALTRAM mining equipment business and intellectual property from Diversified Mining Services Limited (DMS) in an all cash transaction worth $13 million.

Image credit: Flickr User: BarryKusuma

According to the ASX announcement by PPK, an amount of $3 million out of the total sum of $13 million has been held back, subject to completion of an unsatisfied condition precedent regarding the Tomago manufacturing facility. Both companies are confident that DMS will achieve satisfaction of the condition precedent after which PPK will pay DMS the remaining $3million as final payment.

The acquired businesses include manufacture, service and support of the trademark COALTRAM underground transport utility vehicle; manufacture and distribution of Australia’s leading flameproof alternator for use in methane gas prone underground coal mining environments as well as equipment hire. On top of that, PPK’s acquired assets as part of the deal include plant, inventory and hire fleet to a Net Tangible Asset value in excess of $17 million.

“Finalisation of the COALTRAM acquisition is the first step in the PPK strategy of acquiring mining services businesses that have a strong product or service offering at a time in the cycle where their value may not be fully appreciated by the wider market,” stated Robin Levison, Executive Chairman of PPK.

At present, there are around 100 COALTRAMS in service in the Australian underground coal mining environment, while the COALTRAM business continues to benefit from the Original Equipment Manufacturer (OEM) service and support revenue that is generated by keeping this type of vehicle available for 24 hour use. PPK believes that the COALTRAM vehicle has the potential to be exported to other major coal mining jurisdictions.

In addition, the acquisition of the flameproof alternator business also brings an already globally recognized product that is certified for use in high gas methane prone environments and is widely used by a number of global OEM underground equipment manufacturers.

“The Board of PPK is delighted to have completed the first mining services acquisition and believe, in line with its published strategy, that PPK is receiving excellent value given the premium of Net Tangible Assets to purchase price. The Board and management team of PPK look forward to welcoming the COALTRAM employees into the broader PPK business and building upon the strong reputation that the COALTRAM product has established in the Australian underground coal mining market over the last 5 years,” concluded Mr Levison.